Proposed Medicaid Fraud Rules Worry Providers

The state’s Health and Human Services Commission is seeking formal approval for new Medicaid fraud rules that doctors allege deny them due process and expand investigators’ power to halt their funding.

For months, HHSC’s Office of the Inspector General has been increasingly relying on a federal rule — part of President Obama’s health care plan — that allows the agency to freeze financing to any health provider accused of overbilling Medicaid. That means they can halt the flow of funding before they complete a full-fledged investigation, and often, providers say, before doctors are given any chance to defend themselves.

HHSC says the new state rules — a rewrite of the existing statute — give investigators the tools to stop the bleeding before bad actors run off with the state’s money. They say fraud investigations aren’t opened without good reason, and the idea that there’s no due process is preposterous.

The agency says the new rules, which must be approved by the executive commissioner, are necessary to bring the state in line with federal health reform and measures passed in the last legislative session. It is “mostly a clean-up of the existing rules,” agency spokeswoman Stephanie Goodman said.

But attorneys for health care providers, who are still trying to parse the rewritten rules, say the language the state is preparing to codify appears to put even more power into investigators’ hands than what they’ve already received from the federal government. 

“We already have concerns about the discretion the OIG has now,” said Rocky Wilcox, vice president and general counsel for the Texas Medical Association. “These new rules even broaden that discretion.” 

Wilcox and others argue the rules make it too easy for the state to halt funding to a doctor, over anything from a computer-generated analysis of a handful of billing codes, to an anonymous tip to a fraud hotline. They say the new methods threaten the livelihoods of providers and their employees, and they could leave their Medicaid patients — poor children and the disabled — in the lurch.

“If you’re a heavy Medicaid provider, you’re out of business — it literally brings you to your knees,” said Mark Chouteau, an Austin-based lawyer who represents doctors, orthodontists and dentists who have been accused in fraud investigations. “It increases the breadth of the power of the OIG to restrict payment and increases their ability to scrutinize health care provider relationships.”

OIG officials have said they need this enhanced power to crack down on health care providers abusing Medicaid; they’ve described some doctors using the program as their personal ATMs.

Though Texas’ Republican leadership reviles federal health reform, tenets of it have allowed the OIG to take more liberties with their investigations, including instituting “Credible Allegation of Fraud” payment holds that allow them to halt funding if allegations have an “indicia of reliability.”

OIG officials, who have markedly increased their use of such “CAF” holds, say investigators understand what's at stake. They do thorough reviews before halting financing and hire physicians to help with cases that require medical expertise. While it can take months for providers to receive a state administrative hearing over the allegations against them, the OIG says the agency gives doctors the chance to come in for an informal review to make their case at any time.

And at the end of the day, OIG officials say, if allegations are unfounded, the money goes back where it belongs: to the provider.

The new rules under consideration “do not substantially change” current policy with regards to “providers’ substantive rights or the procedural due process afforded them,” Goodman said.